Scott v Copenhagen Reinsurance Company (UK) Ltd.

Under an excess-of-loss aggregation clause covering losses arising from one event, a plurality of losses may be treated as one only where each has a significant causal connection with a single unifying event. A merely weak or remote causal connection is insufficient.

The assessment is one of judgment. The court may use the unities of cause, time, locality and human purpose to assist it, but those factors do not replace the contractual wording. A genuine wait and see deprivation does not make a later total loss an immediate loss at the date possession was first lost.

Lloyd’s underwriting syndicates sought to aggregate their reinsurance liabilities for the loss of a British Airways aircraft stranded at Kuwait International Airport with losses of Kuwait Airways Corporation aircraft and spares seized during Iraq’s invasion of Kuwait.

Langley J held that the Kuwait Airways assets had been lost on 2 August 1990 and arose from one event, namely the invasion and capture of the airport. He held that the British Airways aircraft, later destroyed during the war, did not arise from that event: [2002] EWHC 1348 (Comm).

The syndicates appealed on the basis that, although the British Airways aircraft required a reasonable period of review before total loss could be established, its loss should relate back to the original invasion and be aggregated. The central issue was whether that loss arose from the same event as the Kuwait Airways losses.

1. Appeal dismissed. Rix LJ gave the leading judgment. Keene LJ agreed, and Schiemann LJ expressly agreed that aggregation required a significant causal link to a single unifying event.
2. The phrase arising from one event requires more than a weak causal connection. Its aggregating purpose requires a sufficiently close, relevant and non-remote causal link between each loss and the proposed event. An event is narrower than a continuing state of affairs.
3. The unities of cause, locality, time and, where human action is involved, purpose or intention are useful analytical aids. They do not replace the contractual language. The ultimate question remains whether it is appropriate to regard the losses as one aggregated loss for the policy.
4. The British Airways aircraft was not an immediate total loss on 2 August 1990. It was a genuine wait and see case. Iraq had no policy to seize or permanently deprive British Airways of it, and its ultimate fate depended on later developments. On the facts, its loss occurred through its destruction during the war, or at least arose from the war, rather than from the invasion.
5. Only locality, and the starting point of the enquiry, were shared with the Kuwait Airways losses. There was no unity of time, cause, intent or purpose. The Kuwait Airways assets were specific targets of an acquisitive policy, whereas the British Airways aircraft was present by chance and remained vulnerable because of the later war. Its loss therefore did not arise from the same event and could not be aggregated.
6. The court made no order as to costs.

• Court of Appeal (Civil Division): Dismissed the syndicates’ appeal and affirmed the conclusion that the British Airways aircraft loss did not arise from the same event as the Kuwait Airways losses: [2003] EWCA Civ 688 .
• Commercial Court: Langley J held that the Kuwait Airways aircraft and spares arose from one event, but that the British Airways aircraft loss did not: [2002] EWHC 1348 (Comm).